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Manitoba Hydro's $13.4-billion plan to build two new dams -- and dramatically increase its generating power -- is getting a closer look.

A sub-panel of the Public Utilities Board will look into whether the Keeyask and Conawapa generating stations, and the billions in debt Hydro wants to take on to build them, are in the province's best interests.

For months, the PUB has argued that Hydro should look at cheaper options in natural gas, or perhaps nuclear power, instead.

Low rates for natural gas have cut into demand for Manitoba Hydro power in the U.S.

"Building Keeyask and Conawapa represents a major economic development opportunity for our province," Dave Chomiak, the minister responsible for Manitoba Hydro, said in a release Friday. "The purpose of the Needs For and Alternatives To (NFAT) review is to provide an independent assessment of the need for new generation and to compare the benefits of building new hydro generation to alternatives such as natural gas."

Panel members and detailed terms of reference for the review will be announced later this year.

"The PUB has been calling for this review for years and it finally takes outrage from the public to make it happen.

PC leader Brian Pallister said a full review into Hydro is long overdue.

"The review must contain the Bipole III transmission line, including discussion of alternate routes. Without that it is incomplete," Pallister said.

Clean Environment Commission hearings into Bipole III have been delayed after the Manitoba Metis Federation and other aboriginal groups demanded a new environmental assessment. Hydro had submitted changes to the bipole's path.

On Friday, the province asked the CEC to hold environmental hearings into Keeyask. An assessment of Lake Winnipeg water levels, which Hydro regulates to power its northern dams, is also underway.

News of the PUB inquiry emerged just as Hydro released its second-quarter results. It lost $43 million in the first six months of 2012. During the same period in 2011, Hydro made $13 million.

The Crown Corporation cited infrastructure cost and depressed export sales for the loss, but still expects to post a $30 million profit by the end of the fiscal year.